IAS YAN

An initiative of APTI PLUS

In detail
Minimum Support Price (MSP) is a “minimum
price” for any crop that the government
considers as remunerative for farmers and
hence deserving of “support”. It is also the price
that government agencies pay whenever they
procure the particular crop.
The Centre currently fixes MSPs for 23 farm
commodities based on recommendations of
Commission for Agricultural Costs and Prices
(CACP) — 7 cereals (paddy, wheat, maize, bajra,
jowar, ragi and barley), 5 pulses (chana,
arhar/tur, urad, moong, masur), 7 oilseeds
(rapeseed-mustard, groundnut, soyabean,
sunflower, sesamum, safflower, nigerseed) and
cotton, sugarcane, copra and raw jute.
CACP considers the following costs:
1. A2: covers all cash and in kind expenses incurred by farmers on seeds, fertilisers, chemicals, hired labour, fuel etc.
2. A2 + FL: Actual costs plus an imputed value of unpaid family labour.
3. C2: includes 'A2 + FL' along with revenue foregone on owned land (rent) and fixed capital assets (interest).

Advantages
The minimum support prices are a guarantee price for their
produce from the Government.
MSP is announced before the sowing season so that the
farmers can make an informed decision.
The major objectives are to support the farmers from distress
sales and to procure food grains for public distribution.
It ensures adequate food grain production in the country.
In case the market price for the commodity falls below the
announced minimum price due to bumper production and glut
in the market, government agencies purchase the entire
quantity offered by the farmers at the announced minimum
price.
MSP thus increases the farmers' income which they can invest
in new technology.
It also helps in achieving the Government's goal of doubling
farmers income by the year 2022.

Disadvantages
MSP ensures
that farmers MSP is devoid of any legal backing. Access to it, isn’t an
entitlement for farmers. They cannot demand it as a matter of
withstand right.The government can procure at the MSPs if it wants to.
price fluctuations The only crop where MSP payment has some statutory
and get a element is sugarcane.
minimum MSP has not increased in proportion to the cost of production.
price for their CACP is just “an attached office of the Ministry of Agriculture
produce in and Farmers Welfare”. It can recommend MSPs, but the
decision on fixing and enforcement rests finally with the
unfavourable government.
market Though government announces MSP for 23 crops, it procures
conditions. Also only 1/3rd of those.
with MSP, There is lack of awareness amongst farmers and there is
farmers are incentivised to grow crops, regional variation in implementation.
which are short in supply. In the absence It kills competition and puts pressure on government finances.
of support price, farmers may not find certain The system has been often criticised at WTO platform.
crops lucrative, which would lead to poor
production, resulting in high prices. Sources: Indian Express, The Hindu & others